LONDON - Company insolvencies in England and Wales last month jumped 40% year on year to the highest level since monthly records began in January 2019, government data showed on Friday.

In May, 2,552 companies were declared insolvent, overwhelmingly through creditors' voluntary liquidations, in which a company's directors agree to wind up the business without a formal court order.

However, the government's Insolvency Service said there had also been a 34% increase in compulsory liquidations, partly due to more requests from tax authorities to recover funds from companies unable to pay their tax bill.

Insolvencies in Britain were low during the COVID-19 pandemic because of an 80-billion-pound ($102-billion) business loan programme and a temporary bar on court-ordered liquidations.

However numbers have risen since, hitting a 13-year high in the final quarter of 2022 and staying close to that in the first quarter of 2023.

"Given that trading conditions remain extremely challenging, the number will likely continue to climb through the second half of the year," said David Kelly, head of insolvency at accountants PwC.

PwC said construction and retail were the hardest-hit sectors, and the number of food manufacturers in trouble was also increasing. Some 99% of liquidations featured companies with annual sales of under 1 million pounds, it added.

Businesses and consumers have been hit hard over the past year by a surge in the cost of energy and food, and most companies now have higher wage bills too.

Overall profit margins outside the oil and gas sector had not increased as of the end of 2022, official data show.

Financing costs are also rising sharply, as the Bank of England has raised interest rates to 4.5% from 1% a year ago, and is expected to increase rates again next week as consumer price inflation remained high, at 8.7% in April.

In contrast to the situation for businesses, individual insolvencies were similar to pre-pandemic levels in May. ($1=0.7818 pounds)

(Reporting by David Milliken; Editing by Clarence Fernandez)